Commitments and Contingencies.

Leases

The Company conducts operations in leased facilities located in Texas and New Jersey. The Texas lease includes lease concessions which amounts are included as part of the aggregate minimum lease payments and recognized on a straight-line basis over the minimum lease terms.

Future minimum lease payments required under the non-cancelable operating lease as and for the years ending December 31 are as follows:



2016		2017		2018
$	463,802	$	435,613	$	435,613

Rent expense for the years ended December 31, 2015 and 2014 was $116,360 and $116,887, respectively.

Legal Proceedings.

(a)Neil and Kristine Markey, et al., Plaintiffs v. Lapolla Industries, Inc., Delfino Insulation, et al, Defendants

A complaint initially entitled Neil and Kristine Markey, individually, and on behalf of all others similarly situated, Plaintiffs, vs. Lapolla industries, Inc., a Delaware corporation; Lapolla International, Inc., a Delaware corporation; and Delfino Insulation Company, Inc., a New York Corporation, Defendants, was filed in the United States District Court for the Eastern District of New York and served on or about October 10, 2012 and amended last on November 11, 2013. Plaintiffs brought this lawsuit only individually, having amended out any request for a class action. The complaint alleged, among other things, that Lapolla designed, labeled, distributed, and manufactured spray polyurethane foam insulation, which created a highly toxic compound when applied as insulation resulting in exposure to harmful gases. Plaintiffs sought: actual, compensatory, and punitive damages; injunctive relief; and attorney fees. Lapolla considered the allegations to be without merit and vigorously defended the allegations. On February 4, 2015, the Court dismissed the litigation with prejudice, per the voluntary request of Plaintiffs upon the advice of their new counsel and after their original litigation counsel withdrew citing irreconcilable differences with the Plaintiffs. The Court retained jurisdiction to address a pending motion for sanctions filed by Lapolla. The primary basis for Lapolla’s motion for sanctions is the Plaintiffs’ and their original attorney’s filing of the lawsuit without sufficient factual basis for the claims of personal injury and for failing to comply with discovery obligations to produce numerous potentially dispositive documents that Plaintiffs knew existed and their original counsel either knew or should have known existed. Lapolla seeks to recover over $800,000 in legal fees for the defense of the lawsuit. All motions have been filed with the Court and Lapolla is awaiting a final ruling. The final outcome of this litigation cannot be determined at this time.

(b)Robert and Cynthia Gibson, individually, and as parents and natural guardians of Robert Harvey Lee Gibson, Plaintiffs v. Lapolla Industries, Inc. and Air Tight Insulation of Mid-Florida, LLC, Southern Foam Insulation, Inc., and Tailored Chemical Products, Inc., Defendants.

On March 5, 2014, the Plaintiffs filed a complaint in the Circuit Court of the 18th Judicial Circuit in and for Seminole County, Florida, against Lapolla, Air Tight Insulation of Mid-Florida, LLC, Southern Foam Insulation, Inc. and Tailored Chemical Products, Inc., alleging, among other things, negligence, strict liability design defect, strict liability failure to warn, breach of express and implied warranties, unjust enrichment, and violation of Florida’s deceptive and unfair trade practices act, relating to the design, manufacture, distribution, and installation of Lapolla’s spray polyurethane foam insulation, resulting in personal injuries and real property damage. Plaintiffs sought, among other things: actual, compensatory, statutory, and punitive damages; injunctive relief; medical monitoring, and attorney fees. Lapolla vigorously defended the allegations which proved to be without merit. As a result, Plaintiffs, by and through their counsel agreed to drop the lawsuit and dismiss same with prejudice. All parties shall bear their own fees and costs. Settlement documents and releases are currently being prepared and expected to be executed shortly.

(c)Michael Commaroto, Kimberly S. Commaroto, and Gretchen Schlegel, Plaintiffs v. Pasquale Guzzo a/k/a Pasqualino Guzzo PDB Home Improvements, Perfect Wall, LLC, and Jozsef Finta, Defendants.

Pasquale Guzzo a/k/a Pasqualino Guzzo PDB Home Improvements filed a third-party complaint against Lapolla Industries, Inc. in the Superior Court, Judicial District of Stamford/Norwalk, in Connecticut on January 3, 2013. Guzzo is alleging Lapolla’s spray polyurethane foam product is a defective product under Connecticut law and seeking indemnification and attorney’s fees. On August 28, 2013, Michael Commaroto, Kimberly S. Commaroto, and Gretchen Schlegel filed an amended complaint against Lapolla also asserting the spray polyurethane foam is a defective product. Plaintiffs seek monetary damages, punitive damages, and attorney’s fees, among other relief. Lapolla considers the allegations to be without merit and is vigorously defending the allegations. The outcome of this litigation cannot be determined at this time.

Note 15. Commitments and Contingencies - continued.

(d)Evanston Insurance Company, Plaintiff v. Lapolla Industries, Inc., Defendant.

On October 28, 2013, Evanston Insurance Company filed its original complaint for declaratory judgment against Lapolla industries, Inc. in the Southern District of Texas, Houston Division. Evanston seeks a declaratory judgment that it has no duty to defend or indemnify Lapolla in the Guzzo Litigation. Lapolla made an appearance in the case on February 14, 2014 after being served with a First Amended Complaint. Lapolla considers the allegations to be without merit and is seeking declaration from the court that Evanston does have a duty to defend and indemnify Lapolla. The court ruled on the summary judgment motions on February 23, 2015, finding that Evanston had no duty to defend. The Court signed a final judgment on March 18, 2015. On April 14, 2015, Lapolla filed a Notice of Appeal. Lapolla filed its Appeal with the United States Court of Appeals for the Fifth Circuit on July 13, 2015. This matter concluded on January 11, 2016 with the 5^th Circuit affirming the trial court’s ruling finding no duty to defend in the Commaroto case.

(e)Joseph Greco and Penny Greco, Plaintiffs v. Lapolla Industries, Inc., Jagodzinski Construction, Inc., and John Does, Defendants.

On August 27, 2014, Joseph Greco and Penny Greco filed a Complaint in New York State Court, County of Monroe, against Lapolla, Jagodzinski Construction, Inc., and John Does. The complaint alleged, among other things, negligence, strict liability failure to warn, breach of express and implied warranties, unjust enrichment, violations of the NY deceptive trade practices act, and a NY false advertising statute, relating to the design, manufacture, distribution, and installation of Lapolla’s spray polyurethane foam insulation, allegedly resulting in personal injuries and real property damage. The Grecos sought, among other things: general, compensatory, and punitive damages; restitution, and attorney fees, costs, and disbursements. Lapolla vigorously defended the allegations which proved to be without merit. As a result, Plaintiffs, by and through their counsel agreed to drop all claims against Lapolla and dismiss same with prejudice. Plaintiffs and Lapolla shall bear their own fees and costs. Settlement documents and releases are currently being prepared and expected to be executed shortly. Notwithstanding, Jagodzinski Construction, Inc. continues to seek contribution rights as to Lapolla for any of Plaintiffs’ alleged damages. Lapolla is vigorously defending same claim, and asserts that it is of no merit. The outcome of the Jagodzinki contribution aspect is undetermined at this time.

(f)Various Lawsuits and Claims Arising in the Ordinary Course of Business

We are involved in various lawsuits and claims arising in the ordinary course of business, which are, in our opinion, immaterial both individually and in the aggregate with respect to our consolidated financial position, liquidity or results of operations.